Carbon Disclosure Project 2011


Figure 4: Reported exposure to water-related business impacts and risks


100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%


Suffered water-related business impacts in past 5 years Exposed to risks in direct operations or supply chain


76% 72% 59% 53% 48% 40% 29% 23% 23% 24% 14% Consumer Discretionary


Consumer Staples


Energy Health Care Industrials


Information Technology


Materials Utilities 32% 45% 72% 68%


80%


Awareness of risk in the supply chain is lower than awareness of risk in direct operations


More companies report risk in direct operations (55%, 105) than in the supply chain (27%, 52) and companies’ ability to identify risk in the supply chain is also lower: 38% (72) cannot state whether their supply chain is exposed to water- related risk, compared to only 7% (14) for direct operations. 41% (9) of respondents in the Consumer Discretionary sector cannot state whether their supply chain is exposed to water-related risk, despite the fact that it is dominated by companies in industries that are particularly exposed to supply chain risk such as retailers, hotels and resorts, and automobile manufacturers.


31% (58) of respondents are able to identify key water-intensive inputs (such as iron ore, sodium nitrate, sulfur, coal, natural gas, liquefied petroleum gas, jet fuel, electricity, corn for ethanol production, and


soy) sourced from regions subject to water-related risk. Of the 71 key water-intensive inputs identified by respondents, 18% are more than 50% sourced from these regions. Among sectors, Materials reports the largest percentage (56%) of key inputs that are primarily sourced from regions at risk.


Relatively few companies are managing risks in their supply chain compared to direct operations. 82% (156) of respondents report taking action to manage water resources in direct operations, while 41% (78) report taking action in supply chain and watershed management. Only 26% (50) of companies are actively monitoring water-related risks in their supply chain by requiring key suppliers to report water use, risks, and management plans. Building this level of supplier reporting into business practice is vital for companies that depend on their supply chains, since in many cases the largest proportion of a company’s water use and associated risk can be in the supply chain. While 60%


(15) of respondents in the Consumer Staples sector, which includes food, beverage and tobacco industries, identified water-related risk in their supply chain, only 32% (8) of these companies require key suppliers to report water use, risks and management plans.


Those companies that identify risk in their supply chain can take practical steps to mitigate risk, as shown by certain companies. H&M Hennes & Mauritz is participating in the global Better Cotton Initiative to educate cotton farmers on better farming practices and thus promote resilience to drought in their supply chain. PPR’s subsidiary Puma has set water use reduction targets that go beyond its operations to include its suppliers’ water use as well.


10


Percentage of respondents


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